Hi Pancho (?), interesting chart but what's your take? Are we topping? Personally, I think not, for a couple of years. The spike is obviously rate driven, and we will have to wait to see how much pent up demand there is out there, waiting for prices to decline further. This rate increase took them by surprise, and you don't buy a house like you buy stocks - it will take a while for this sub-cycle to complete. We should have a continued spike, and I wouldn't worry if it were to reverse in a few months. Builders are aware of this and are opting for price increases rather than supply increase. In the process, their earnings are going to surge. Once the mortgage driven leg is over, buyers will be confronted with stable rates, and home prices driven by structural demand. This will give you the second leg.

Why The Housing Market Is An Accident Waiting To Happen: Part 2 [View article]

Dave, I completely agree with Interleaf. see my own article http://seekingalpha.co... . It goes back to July 2011, but the analysis still stands.

A couple of questions on your chart (Zerohedge that is) about New Home Sales Prices vs. Real DPI. First, Real DPI stands at $32,875, flat with 2011. Yet, the ratio goes from 6.5x to 8.0x, which implies an increase in Prices of 23%: (a) this seems very high to me; (b) is the number in real or nominal terms?

Second, Nominal DPI is now at $38,319, vs. $36,000 in 2011. Do you have a chart that plots the ratio in nominal terms?

Cullen, thanks for the chart, I have been looking for it. One question though. You infer that Margin Interest is a leading indicator. However, as the truism go, the Retail Investor is a contrarian indicator. This would suggest that Margin Interest, which is mostly retail, is a lagging indicator instead. Your thoughts? It wouldn't detract from the fact that Margin Interest is too high for comfort, but.

Riddle:The only sector that is moving the needle of the US Economy and Employment is Housing.Housing Stocks are decimated today as if the recovery is over because of the end of QE.But, if the needle is moving back, how could QE end?

Answer:QE and Housing are inversely correlated. If QE is to end, Housing has to improve, and then some.

Note: This is now. During the first QE phases, from the end of 2008 to September 2011, Housing stocks continued to plummet while the market was rallying: PHM went from $12 to $4, TOL went from $20 to $14. Many reasons for that, to include the death of “little m”, but that’s for another time. It’s called a lag.

So, one of two things. Either the market has an acute schizophrenia attack, or it's scared of something else. QED.

I agree, plan for the worse. I did not put this in my article, but I had sent a similar one to my email group at large, in which I suggested we organize a petition to support Dr. Ben. Let's see if Apathy rules The Land of the Braves.

prateek, this is why we always say "everything else being equal", right.... When I felt the air pocket was over last Monday at 1643, I couldn't anticipate Obama would change yet another variable and pull the rug from under the rally. I was not surprised by anything the Chairman said, to the contrary: I like to hear that the economy and the financial system may have recovered by 2014. But I do believe that Bernanke out puts the risk premium back into QE, and its many potential misuses. So to answer your question, the supports are:

(a) 1608: from the November 2012 lows, the bottom of the Regression Channel as defined by a parallel at one standard deviation (sounds complex, but it's fairly classic) is at 1608; this is where we stopped today, so far (9:54 am as of this writing); there must be another reason for support at this level, since this where we stopped at on 6/13;

(b) 1600: this is the 25% Fibonacci retracement from the November 2012 - May 2013 move. It also is the Regression Line support from the October 2011 lows.

(c) 1555: next Fibonacci retracement, at 38.2%.

(d) the 1515-1540 area: 1540 is the Regression Line from the March 2009 lows, 1520 is the bottom of the Regression Channel from the October 2011 lows, and 1515 is the 50% Fibo retracement.

(e) for reference, the bottom of the Regression Channel from the March 2009 lows is 1400.

I picked these three Regression Channels because, simply enough, their top band all converge at 1660 on 5/24 or so, pretty close to the consolidation area of the recent high.

Since we are hovering around 1608, I am going to take half of my shorts out, and the rest at 1600 if we get there. An AD line of 1/28 is pretty close to panic selling.